According to its press release, the Hungarian Competition Authority (“HCA”) has recently imposed a fine on an investigated company (ÉTER-1 Kft.), after employees deleted files from the company’s computers during a dawn raid carried out by the HCA for suspected bid rigging in 2012. The HCA investigation is still ongoing and the company has appealed against the fine.
The imposition of a procedural fine for improper conduct during a dawn raid (and a subsequent press release) is an unusual, if not unprecedented step by the HCA.
The Hungarian Competition Act authorizes the HCA to impose a procedural fine in the maximum amount of 1% of the investigated company’s net turnover in the preceding year in the event that the company seeks to destroy evidence during an investigation. In the case at hand, the HCA imposed a procedural fine amounting to 78% of the statutory maximum.
Taking investigative powers seriously
The fact that the HCA published a press release in relation to the imposition of such fine signals to market players that the HCA takes its investigative powers seriously. The Hungarian Competition Act enables the HCA to conduct dawn raids (subject to prior judicial approval) and to seize documents relating to the subject matter of the investigation. The HCA can also seize documents evidencing a competition infringement unrelated to the scope of the dawn raid at hand, which can be used as evidence against the investigated company only if the HCA seeks subsequent judicial approval for the seizure.
In the last few years, the HCA’s practice has moved towards seizing electronic documents during dawn rains. The HCA increasingly prefers taking mirror copies of hard disk drives/servers to be searched by the case handlers without the company being present, which the HCA is authorized to do under the Hungarian Competition Act.
The recent amendment to the Hungarian Competition Act, in force since 1 July 2014 (see our previouscommentary), has kept the HCA’s wide investigative powers, and has introduced detailed procedural rules on the handling of seized electronic documents. The new rules were based on the prevailing practice of the HCA, which had been unregulated before. This part of the legislative amendment may contribute to legal certainty and the enforcement of procedural safeguards. However, the amendment has also significantly extended the timeframe (60 days as from the completion of the HCA’s work copy of the electronic evidence seized) during which the HCA can search data carriers for evidence outside the scope of the investigation and seek subsequent judicial approval. The HCA does not delete out-of-scope documents from the mirror copy seized.
Narrower scope of legal privilege
Documents subject to legal and professional privilege remain outside the scope of evidence that the HCA can review or use, provided that the company specifies such documents. However, the recent amendment has slightly narrowed the scope of legal and professional privilege. Based on the new wording, it appears that documents prepared for the purpose of attorney-client communication (but which had not been actually used in such communication) are no longer protected.
It is not difficult to construe from the HCA’s press release on the fine for destroying evidence a warning message to companies that the HCA is determined to fully use its powers during investigations. Therefore, it is crucial for companies to know their rights and make use of them during their everyday operations – and not less so during a dawn raid and subsequent investigations conducted by the HCA.